Germany's Commerzbank loses UK banker bonus appeal
LONDON (Reuters) - Commerzbank, Germany's second-largest lender, on Friday lost a high-profile appeal against a UK court ruling that forces it to pay 104 London-based bankers around 52 million euros in bonuses, plus costs.
Commerzbank had argued that its now-integrated Dresdner Kleinwort subsidiary was justified in slashing 2008 bonuses as losses spiralled to 6.5 billion euros and threatened the survival of the business.
The decision flies in the face of a regulatory clampdown on bonuses, as well as government, public and investor scorn at the size of payouts amid disappointing returns and billions spent on bank bailouts since the 2008 crisis.
"It is a regrettable outcome in view of the on-going regulatory, public and shareholder calls to establish a sound relationship between banks' performance and variable remuneration," Commerzbank said.
The Frankfurt-based bank added it was considering its legal options. It has seven days to apply for an appeal to be considered at the Supreme Court.
Some lawyers have said the three-and-a-half year legal battle by the largest group action of its kind at the High Court represents a triumph of David over Goliath.
But they have also warned it sets a worrying precedent for banks that have had informal bonus discussions with staff, or those facing liquidity problems or mergers, which might now be required to honour pre-agreed bonus terms.
The dispute hinged in part on whether Commerzbank's often informal promises of bonuses constituted a contractual agreement and whether it had been within its rights to introduce a "material adverse change" (MAC) clause in bonus letters after the Dresdner takeover in 2009, which the German bank argued allowed it to cut the payouts.
In a unanimous decision to dismiss Commerzbank's appeal, the Court of Appeal found there was "overwhelming evidence justifying the conclusion that this promise (of bonuses) was intended to be legally binding" and the introduction of the MAC clause amounted to a breach of duty of trust and confidence.
High Court Judge Robert Owen enraged Commerzbank last May by suggesting it had sacrificed the contractual rights of its employees "on the altar of public perception" after being forced to seek a government bailout following the Dresdner deal.
Lawyers for the bankers have said the heavy Dresdner losses had been well known and, in fact, had been the reason the bank had set up a "staff retention plan" to avoid mass defections, promising loyal bankers a share of a minimum 400-million-euro guaranteed bonus pool.
Clive Zietman, representing some the Dresdner bankers, said his clients were delighted with the outcome and doubted that Commerzbank would be granted the right to appeal.
The right to appeal will only be given if Commerzbank's lawyers can prove there is a point of law to be determined or if there was an error in the ruling.
(Editing by Mark Potter)
- Tweet this
- Share this
- Digg this
- Pro-independence Scots narrow gap to victory ahead of vote - poll
- Polls say Scotland will spurn independence, but are they right?
- Ukraine accuses Russia of 'undisguised aggression' as rebels advance |
- Blind joins while Manchester United wait on Falcao
- Golf-U.S. PGA Tour Deutsche Bank Championship scores